Cycle Trading

When stocks dropped almost 6% on June 11th to close below the 200 day MA it looked as if stocks were well on their way to an intermediate cycle decline. Stocks regained the 200 DMA on the 12th and printed a bullish reversal on the 15th. Once a swing low on the 16th formed we noted that it appeared that the Fed was able to prevent stocks from crashing into an intermediate cycle low.

Once again the Fed has defended the 200 day MA.

Stocks printed their lowest point on day 21, which is too early to expect a DCL. The rally out of the day 21 low did not managed to turn the 10 day MA higher. When stocks lost over 2.5% on Wednesday it looked stocks were going to compete their daily cycle decline and it was like deja vu all over again. Then stocks printed a bullish reversal off of the 200 day MA on Thursday. This bullish reversal has already caused the 10 DMA to turn higher. If stocks can form a swing low and close above the declining trend line then it will look as if the Fed has managed to form an early daily cycle low.

Stocks are in a daily uptrend that has been characterized by highs occurring above the upper daily cycle band and lows forming above the lower daily cycle band. If a swing low forms here, above the lower daily cycle band, then stocks will remain in their daily uptrend and trigger a cycle band buy signal.